banks are writing off bitcoin while focusing on the underlying
He adds that while Santander is very keen to explore the possibilities of blockchain, we won't be sending cash over blockchain networks any time soon. Belinky says that "while getting to a working prototype could be something that we do within months, getting to an actual product that regulators say is good to go and the compliance guys like — that will take a while."
Julio M Faura, global head of R&D innovation at Santander, told Business Insider: "For us, the first obvious space to explore all of this in is payments, particularly international payments. Later on we think smart contracts have the potential to transform many of the other things we do.
Santander InnoVentures, which Belinky heads, is the Spanish banking giant's $100 million (£64 million) fintech investment fund, launched last year. The fund has made 3 investments so far and Belinky said 2 more are close to completion. A source told Business Insider that one of these is a startup working on blockchain technology. Belinky declined to comment.
"We have internally identified 20 to 25 use cases where this technology can be applied," Mariano Belinky, head of Santander InnoVentures told Business Insider at MoneyConf in Belfast this week. Belinky reeled off international money transfers, trade finance, syndicated lending and collateral management as some of the areas where blockchain technology could be applied.
"We still haven’t made anything official, we haven’t announced anything publicly, but we have an internal team working on this. We’ve done some proof of concepts."
Banks run on systems that were in some cases built decades ago and as a result are slow, costly and cumbersome. The blockchain — the program that lets people send bitcoin to each other and records those transactions — doesn't have these legacy issues.
That makes it attractive to banks looking to soup up their money transfer businesses, but the technology also has potential in other areas — distributed ledgers could be used for "smart contracts" when banks make loans, for example, recording who's borrowed what across a public network.
But Faura adds: "This thing will only be interesting if many banks take part and collaborate. We are talking and experimenting with several banks."
It's pretty clear why the banks are doing all this. As well as making their systems smarter, it could save them a huge amount of money. A report co-authored by Santander earlier this month estimated that blockchain technology could reduce banks' infrastructure costs by up to $20 billion (£12.8 billion) a year.
"What we see as the foundation use case, which is international payments, we don’t really need a coalition of 50 banks to make it work. We have ten major geographies. Just us connecting our ten major geographies will allow 100 million customers to make instant payments worldwide. If we partner with two or three banks similar to us we’ve got pretty much global coverage."
Pair thinks it will be at least 5 years before any banks seriously adopt a version of blockchain technology.
The blockchain keeps a public record of transactions, spread across a distributed network, and allows much quicker transfer of balances. As a result, sending bitcoin is faster, cheaper and more transparent than sending traditional currencies.
Belinky chips in: "It’s like having the first phone — there’s no point, you can’t ring anyone."
Santander chairwoman Ana Botín. REUTERS/Stefan Wermuth
Santander, the world's tenth biggest bank according to Forbes, is one of several lenders investigating how to use the blockchain in traditional banking. UBS has set up a blockchain research lab in London, Goldman Sachs has invested in bitcoin startup Circle and Nasdaq is also experimenting with the technology.
Stephen Pair, CEO of bitcoin company Bitpay, told me during our interview at MoneyConf that he's in conversation with several banks about the potential of blockchain and related technologies. But he said: "I’ve been in and around banks for a while and they take years, even with software that’s well known and well understood."
Faura is heading up a team in Santander dubbed Crypto 2.0 — referring to cryptocurrencies — which is carrying out experiments with the blockchain and digital currencies.
Belinky told BI: "We’re very excited about distributed ledgers and blockchain technology. They really have the potential to disrupt many of the basic processes we have underlying our transactional products."
Banks mostly aren't interested in bitcoin, but they are interested in the software that runs the digital currency — the blockchain.
Wealth Manager Canaccord: ICOs Could Become Commonplace
Initial coin offerings (ICOs) could one day come to be seen as similar to initial public offerings (IPOs), according to a new report from financial services firm Canaccord Genuity.
Alleged Bitcoin Launderer Faces Extradition Hearing Next Month
An alleged money launderer tied to the defunct BTC-e bitcoin exchange and wanted by both Russia and the U.S. will attend an extradition hearing next month.
The Dec. 6 hearing, The Associated Press
Fujitsu Eyes Cryptocurrency Trading With Cross-Blockchain Payments Tech
Japanese IT firm Fujitsu has unveiled a new payments technology designed to facilitate transactions between blockchains.
Announced today, the "ConnectionChain" project is aimed at providing a way f
Brokerage Chief: Bitcoin Futures Must Be Quarantined
A well-known electronic brokerage firm is issuing dire warnings against the CME Group's plan to launch a bitcoin futures contract next month.
But Interactive Brokers, in a comment letter dated Nov.
Tezos Founders Hit With Second Class Action Suit
For the second time in less than three weeks, a lawsuit has been filed against the founders of the Tezos project.
Pursued in the U.S. District Court in Florida, the suit alleges Tezos founders Arth
India's Supreme Court Prods Government on Bitcoin Regulation
The Indian Supreme Court has asked the government to respond to calls to regulate bitcoin.
Three justices issued a notice to the central bank, the market regulator, the tax department, and several
'Big Four' Firm KPMG Joins Blockchain Advocacy Group
Accounting giant KPMG has become the latest member of the Wall Street Blockchain Alliance (WSBA).
Joining the non-profit trade association as a corporate member, KPMG will assume a seat on its boar
Morgan Stanley CEO: Bitcoin Is 'By Definition Speculative'
Morgan Stanley chairman and CEO James Gorman has said that bitcoin is "punching above its weight," according to a news report.
Speaking to CNBC this morning, however, Gorman further said that the c